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Planning Your Exit Strategy into Your Business

The importance of having an exit strategy in a business plan shouldn’t be underestimated. This forward thinking can help to ensure you’re prepared if and when you no longer want to head up your company, for example when you wish to retire. Whether you’re considering selling to another business or merging your company with a similar organisation, or you’re keen to adopt another approach, advanced planning will make this process quicker, easier and less stressful.

The way you choose to sell will depend on a number of factors, such as the size and nature of your company and the market conditions at the time. To help you prepare for the future and make the right decisions, here are some common exit strategies and important considerations to bear in mind.

Mergers

A merger is when two or more businesses join together to form a single company with new stock and usually a new name. This can be mutually beneficial for all organisations involved as it can lead to significant cost savings and increased economies of scale. Mergers are often done to acquire market share, grow revenue and expand a firm’s reach into new territories.

Acquisition

Acquisition is when a business buys a target company. Often acquirers will buy the shares of a business (51 per cent or more) and continue to trade under the original company name or brand. Also referred to as ‘strategic’ or ‘trade’ acquisitions, these arrangements can enable firms to gain an established speciality brand and the reputation that comes with it. They can also be an effective way for companies to gain market share and new customer bases.

Initial public offering (IPO)

An initial public offering is the first sale of a private company’s stocks to the public. While not suitable for all businesses, an IPO can be very profitable in certain circumstances - especially for high-growth organisations. Usually, the owner and management remain at the company and the firm continues to operate as normal. There are downsides associated with IPOs however. For example, it results in a greater need for disclosure, and the costs of complying with the relevant regulatory requirements can be high.

Management buyout

A management buyout happens when a business’ management team purchases the operations and assets of the company. This approach can be beneficial because existing managers already know how the company works and are therefore in a strong position to help it succeed. They can also have good relationships with customers and clients. However, it’s important to carefully consider whether your management is ready and can afford to take over before deciding on this strategy.

How we can help

By understanding your options when it comes to exit strategies and including them in your business planning, you can ensure you make the right decisions for your company and for you.

Related

How is 2018 shaping up for business sales? Our latest free-to-download interactive online magazine is out now, and it’s full of transaction news, market insights and current deal trends. There’s commentary from entrepreneurs and M&A professionals alike – making iDeal your essential guide to the world of business sales. In this issue:

Moonpig.com founder and former Dragon’s Den investor Nick Jenkins talks selling, buying and investing in business